Spring Valley Man Charged in Federal Case Involving $10 Million in Lost Duties

Gerardo Chavez of Spring Valley was taken into custody Wednesday, accused of being part of a ring that illegally imported hundreds of millions of dollars in foreign goods into the United States through the Port of Long Beach.

A criminal complaint unsealed in federal court in San Diego charging eight people and three corporations in the ring, which prosecutors say led to the loss of more than $10 million in customs duties.

Three of the defendants, including Chavez, 42, president of the San Diego Brokers Association, were taken into custody early Wednesday morning, federal authorities said.

Chavez attended San Diego State University in the 1990s, according to a Linked-In profile.

A woman answering the phone at the La Presa Avenue address listed for  Chavez said he wasn’t home and offered no other information.

Minutes later, a younger woman at the same number phoned Patch and said: “Nobody else should be knowing about this. ... This is none of your concern and please stop calling.”

According to the 56-count complaint, the defendants’ scheme focused on buying large, commercial quantities of foreign-made goods and importing them without paying import taxes or customs duties.

As alleged in the charging documents, wholesalers in the United States would procure commercial shipments of, among other things, Chinese-made apparel and Indian-made cigarettes, and arrange for them to be shipped by ocean container to the Port of Long Beach.

Before the goods entered the United States, the defendants allegedly generated paperwork and database entries indicating that the goods were not
intended to enter the “commerce” of the United States, but instead would be “transshipped” in-bond to another country, such as Mexico.

As noted in the complaint, the “in-bond” process is a routine feature of international trade. Goods that travel in-bond through the territory of the United States do not formally enter the commerce of the United States, and therefore are not subject to customs duties.

By claiming that the goods would be transshipped in-bond to another country, the defendants falsely represented that no customs duties applied,
according to the complaint.

Instead of completing the in-bond transshipment, the defendants would hire truck drivers to haul the shipments to warehouses throughout Southern
California, the complaint states.

After allegedly generating the false paperwork and database entries, the goods would then be diverted back to Los Angeles and other destinations for shipment throughout the United States.

As the alleged co-conspirators had effectively imported the goods tax free, they could in turn sell more merchandise at cheaper prices—and reap greater profits—than their law-abiding competitors, including domestic American manufacturers of the same goods, prosecutor said.

Two firms from Tecate, Mexico—International Trade Consultants LLC and Tecate Logistics LLC—were charged in the complaint, along with M Trade
Inc. of Los Angeles.

—City News Service contributed to this report.